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Raising taxes to cut the deficits

By Jennifer Liberto, senior writerFebruary 14, 2011: 3:54 PM ET

WASHINGTON (CNNMoney.com) -- President Obama's 2012 budget proposal reduces the deficit by $1.1 trillion over the next decade partly through hundreds of billions of dollars in increased taxes for wealthy individuals, oil and gas companies, and big banks.

Overall, the administration envisions generating $39 trillion in revenue from 2012 through 2021.

The White House would raise some $350 billion by getting rid of tax breaks in the coal, oil and gas sectors, resurrecting an environmental corporate tax, and targeting "loopholes" in the international tax system.

It would also raise another $320 billion by capping tax deductions on things such as charitable donations and mortgage interest paid by the wealthiest Americans. They'd use that money to help middle class families avoid the Alternative Minimum Tax for another three years.

Those tax moves would be in addition to allowing Bush-era tax cuts to lapse for families making $250,000 or more starting in 2013, which would avoid a $1 trillion increase in the deficit over ten years, according to the Treasury Department.

Many of these Obama proposals to hike taxes have been offered -- and spurned -- in the past. They could again fall on deaf ears, especially with Republicans having far more power in Congress.

For example, there's a proposed tax on the largest financial firms and banks that caused the financial crisis that would raise $30 billion over 10 years to "discourage leverage" in the financial system, said a Treasury official.

But a conference committee had to strip an identical fee out of last year's Wall Street reform law to assure the bill could pass both chambers of Congress and become law.

Here are some other tax hikes that are being offered:

* Oil, gas and fossil fuel companies would lose tax breaks and subsidies and have to pay more taxes on profits, raising $46 billion over the next decade.

* All companies would face new "Superfund" taxes that would go toward environmental clean-up, raising $20 billion over the next decade.

* Financial partnerships, including some hedge funds, would be subject to higher taxes on profits, raising $15 billion over the next decade.

* Companies that do business or transfer profits overseas would lose tax breaks, raising $129 billion over the next decade.

* Companies that purchase life insurance contracts, including companies that take out policies on their own employees, would lose some tax breaks, raising $14 billion over the next decade.

The White House also wants to pass some sort of package changing the way corporations pay taxes. But officials offered no specifics, saying they'd rather wait to work with Congress.

"That sort of fundamental reform can't be done without everyone on board," a senior Treasury official said Monday.